July 1, 2008

The Myth of Illiberal Capitalism

America’s unipolar moment was indeed that. A moment. Giddy with a sense of triumph following the dissolution of the Soviet Union in 1991, Americans quickly realised that they had a window of opportunity when their global power would go unchallenged. The period that followed saw robust American economic growth riding on the high-tech revolution; successful military or diplomatic interventions in Bosnia, Haiti, Kosovo and Northern Ireland; unfinished endeavours in Palestine, Korea and Afghanistan; and a severe setback in Iraq. Today, not even twenty years after the fall of the Berlin Wall, the evolution of a new kind of multi-polar order appears imminent. The American strategic community finds itself unsure about where its next big challenge will lie.

Cold war redux?Having watched China’s unparalleled economic rise and Russia’s resurrection as a muscular energy power, some Americans and western Europeans have focused upon the rise of authoritarian or illiberal capitalism as a viable and attractive alternative to the US-led democratic capitalist order. They believe that states like Russia and China, benefiting from strong centralised political rule and the lucre of global commercial and financial networks, will together pose the next great ideological challenge to the United States and its allies.

This reading of the geopolitical future is based in large part upon the American experience of the cold war. Arguments in favour of this thesis are frequently couched in cold war terms. It is no surprise that the new challengers to the United States are the same as those before 1991. Robert Kagan, the author of The Return of History and the End of Dreams, has been among the most vocal proponents of this theory, describing this future challenge explicitly as “a new ideological struggle of the kind that dominated the cold war”. With the aggressive fight against the so-called ‘war on terror’ simultaneously souring and showing itself to be limited in its spread and impact, illiberal democracies have become the latest neo-conservative bête noire.

To say that non-democratic powers are in alliance with one another against the US-led democratic world, as Mr Kagan and others suggest, is plainly incorrect. China and Russia have contrasting views on religion, which had proved to be the Soviet Union’s Achilles’ heel. Vladimir Putin proudly flaunts his religiosity, while several major threats to the Chinese state—such as Tibetan monasticism, the Falun Gong movement and underground Christian churches—are religious in nature. China and India frequently have overlapping views and oppose the West on issues such as climate change and trade.

On other matters, most notably Islamic extremism, all the major democratic and non-democratic powers share similar concerns. Today the United States backs non-democratic leaders such as Pervez Musharraf and Hosni Mubarak. China prefers the democratically-elected Yasuo Fukuda in Japan and Ma Ying-jeou in Taiwan. When Mr Kagan and his ilk criticise China for its overtures towards non-democratic regimes in the energy-rich states of Sudan, Burma and Iran, they conveniently ignore similar US policy towards Saudi Arabia, Kuwait and Angola.

Mr Kagan’s argument should not be simply ridiculed and ignored. Some or all of it has been embraced not just by several American scholars, but also by some European analysts and others, such as Israeli scholar Azar Gat. Nor is this concept simply the result of idle speculation by armchair policy wonks. Republican presidential candidate John McCain, who provided a glowing endorsement of Mr Kagan’s recent book, has frequently threatened to take concrete steps to counter the threats posed by illiberal capitalist states. He has spoken repeatedly of establishing a League of Democracies, and has threatened to expel Russia from the G-8 in favour of Brazil and India, on the grounds that the group was intended for “leading market democracies”. Should Mr McCain win the White House, the struggle against illiberal capitalism may possibly come to the forefront of American foreign policy, especially in its dealings with other major powers.

The view in India, another large democratic power, is altogether different. China is perceived clearly as a non-democratic single-party state, with its peaceful rise as a responsible stakeholder still far from certain. In contrast, Mr Putin’s Russia is seen as a democracy. It is frequently illiberal, with the growth of the Gazprom-Kremlin nexus and the high-profile murders of several journalists, but nevertheless remains a democracy, with power ultimately derived from the ballot box. Mr Putin’s method of maintaining power—control at home being used to enable strength abroad, which in turn justifies strong rule at home—has been severely criticised in American foreign policy circles as undemocratic. But this strategy has also been utilised to varying degrees by other leaderships, including those of the United States and India.

Russia today is in fact more similar politically to a host of nominal but flawed democracies the world over than it is to China. Yet American antipathy towards Russia is widespread. In a poll conducted last year of one hundred American foreign policy experts, Russia rated as the ally that least served US national security interests, ahead of Pakistan and Saudi Arabia.

India may be proud of its own democratic traditions. But other than token efforts such as the Global Democracy Initiative, it is unlikely to put democracy at the forefront of its list of foreign policy objectives, certainly not in conjunction with the United States. One significant reason, other than India's interests with regard to states like Burma and Iran, is a problem of definition. While Americans are happy to lump Russia and China together as authoritarian regimes, Indians are more liberal in their definition of what constitutes a democracy. Indian foreign policy elites understand better than their counterparts in Washington that democracies are not always perfect.

A Brief History of Illiberal CapitalismThe illiberal capitalist model is by no means a new phenomenon. The Asian Tigers were thriving nondemocratic capitalist states during much of the cold war. Neither Hong Kong (an imperial territory) nor Japan (effectively a one-party state) were perfect multi-party democracies. But what transpired in almost all these states is instructive. Taiwan and South Korea turned into competitive democracies, as did, in different ways, the Philippines and Indonesia. The long-time ruling party’s control in Malaysia suffered a setback at the polls earlier this year. An uneasy democracy returned to Thailand following a military coup in 2006. One party rule is also under threat in Japan where the opposition recently won a majority in the upper house of the legislature. Hong Kong, returned to China in 1997, remains an exception.

This gradual transition to democracy has not been limited to Asia. Several South American countries underwent similar evolutions to become free-market liberal democracies, as did South Africa, Spain and Mexico.

The political developments in the majority of these countries were accelerated to some degree by the decrease in existential national threats, stemming from the end of the cold war. With communism increasingly discredited as a political force, the requirements for military or nationalist leaderships to repress communist revolutions evaporated. American neo-conservatives appear not to have learned this lesson. Their proposed policies and pugnacious rhetoric play into the hands of Mr Putin and the Chinese Communist Party by providing them with an apparent national threat, which in turn helps illiberal leaderships to retain power.

The End of the End of the End of HistoryMr Kagan wrote his latest treatise in conscious refutation of Francis Fukuyama’s ‘end of history’ prediction made almost twenty years ago. Inspired by Hegel, Marx and the French thinker Alexandre Kojeve, Mr Fukuyama argued not that events would stop, but that the triumph of liberal democracy with the end of the cold war would mark the “end point of man’s ideological evolution”. His thesis, tempered by caveats, was expectedly controversial at the time of its publication in 1989. Following the September 11, 2001 attacks and the hysteria surrounding Islamic extremism, it was widely dismissed in favour of other theories, such as Samuel Huntington’s ‘clash of civilisations’ thesis.

Yet for all its flaws, and its author’s subsequent amendments, Mr Fukuyama's contention reads truer today than it did twenty years ago. Certainly, there remain potent outliers to the global norm of free-market liberal democracy. But what few have recognised is that there will always be those exceptions, frequently resource-rich states that feed off the larger globally integrated market. Newsweek International editor Fareed Zakaria is among those to have noted this phenomenon. “[C]ertain countries—those endowed with natural resources, especially petroleum and natural gas—are getting free rides,” he writes in his recent book The Post- American World. “They are surfing the wave of global growth, getting rich without having to play by most of the rules that govern the global economy. This phenomenon is the strange but inevitable outgrowth of the success of everyone else. These countries are the non-market parasites on a market world.”

Americans should therefore not be worried about the Return of History. Other than perhaps its size and speed, China has quite closely followed the growth pattern of several other Asian states such as South Korea, Taiwan, and Japan, which were based initially on comparative advantages in manufacturing and an emphasis on infrastructure.

It appears plausible that China may also evolve along a similar path politically, with glasnost following perestroika. Energy-rich Russia, in contrast, could evolve in the opposite direction, with state controlled energy companies enriching the centre and the people at the expense of political freedom. Russia, in short, may end up as one of the parasites, although certainly not to the degree of Saudi Arabia or the emirates.

The new neo-conservative agenda, should it take hold in US foreign policy circles, will adversely impact the United States’ relationships with Russia and China. But of equal concern, it may threaten relationships with other proudly democratic states, like India, that do not necessarily share America’s reading of history.